TMI Blog2022 (10) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... rned income from sub-contract work and, thereafter, after considering the reply submitted by the assessee, the AO reached a conclusion that the assessee's claim regarding its working as a sub-contractor was not to be accepted and that the assessee's such claim was to be rejected. Thereafter, the AO proceeded to hold that the assessee's work was in the nature of providing accommodation entries and based on this conclusion, the AO held that a rate of 8% should be applied being percentage of commission earned on providing the accommodation entries. Thus, in view of the questionnaires issued by the AO and the replies submitted by the assessee, the conclusion reached by the AO of rejecting the assessee's claim apparently proves that the AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. It is not a case, where no inquiry had been made by the AO. Merely because the Ld. PCIT felt that further inquiry should have been made does not make the order of the AO erroneous and prejudicial to the interest of the Revenue. We also note that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Jaini , CA and Sh. Vibhore Garg , CA Revenue by : Sh. Sarabjit Singh , CIT DR ORDER Per Bench : The captioned appeals are preferred by the different assessees against the separate orders, each dated 29.03.2022, passed by the Ld. Principal Commissioner of Income Tax, Chandigarh [hereinafter referred to as 'PCIT'] for assessment year 2012-13. Since the issues involved in all the appeals were similar, they have been heard together and are being disposed off by this common and consolidated order for the purpose of convenience. 2. At the request of the Ld. AR, ITA No. 481/Chd/2022 in the case of M/s. Shiv Shakti Constructions was taken as the lead case. 2.1. The brief facts in this case are that the Department was in possession of a certain information that the assessee firm had been used by another company M/s. S.P. Singla Constructions (Pvt.) Ltd. to book bogus expenses to bring down it profits and that the assessee firm had allegedly received bogus entries of Rs. 27,47,393/- from M/s. S.P. Singla Construction (Pvt.) Ltd. and Rs. 2,015,306/- from M/s. SPS Structures Ltd. during the year under consideration. Allegedly, no actual work had been done b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any business activity during the year. 2.4. In the assessment order, the AO also made a reference to the statement of Shri G.K. Garg, the Auditor of S.P. Singla Group, wherein he had accepted on oath that many firms were shown as sub-contractors in the books of account of M/s. S.P. Singla Construction (Pvt.) Ltd. which were created for the purpose of booking bogus expenses and that these firms had never performed any construction related activities. 2.5. Based on all these observations, the AO proceeded to hold that it, thus, stood established that the total receipts for the year shown by the assessee firm to have been received from M/s. S.P. Singla Constructions (Pvt.) Ltd. and M/s. S.P.S. Structures were mere paper entries for allegedly reducing the profits of S.P. Singla Group of Companies and were in the nature of accommodation entries as no details of business activity done during the year had been provided by the assessee. 2.6. Thereafter, the AO required the assessee firm to show cause as to why commission at the rate of 8% on the total receipt of Rs. 48,18,768/-, as shown in the income Tax Return, may not be taken as income of the firm. The assessee was also requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided accommodation entries to other group of companies and accordingly, you had earned commission income for providing such entries. Further, you had not carried out any business activity during the year under consideration and only provided accommodation entries on commission basis. Though, the AO rejected your claim of bass income and your income for the year was calculated at Rs. 3,85,501/- @ 8% of the receipt of Rs. 48,18,768/- which is against the provision of 44AD(6)(ii) of the Act which reads as under:- (6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to- (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business As such whole gross receipts of Rs. 48,18,768/- are required to be treated as commission income and the difference of Rs. 44,33,267/- (48,18,768 - 3,85,501) has not been taken into account as income by the AO while framing the assessment . From the aforesaid facts and circumstances of the case, it is noticed that the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee firm was covered under the provisions of section 44AD of the Act and nor was the calculation made by the AO @ 8% justified as the AO was required to treat the entire gross receipts of Rs. 48,18,768/- as undisclosed income of the firm. The Ld. PCIT concluded that the assessment order was passed without making inquiries or verification and, therefore, the order of the AO was erroneous as the AO had not examined/verified about the complete details/facts and that it was also prejudicial to the interest of the Revenue. The Ld. PCIT also invoked Explanation 2 to section 263 of the Act and set aside the assessment order to the file of the AO for passing a fresh order in accordance with law in respect of the issue highlighted in the order passed u/s. 263 as well as in the Show Cause Notice issued u/s. 263(1) of the Act. 2.13. Now, the assessee has approached this Tribunal challenging the order passed u/s. 263 of the Act by raising the following grounds of appeal:- 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and facts on the file in as much he has failed to show as to how the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interest of Revenue. ITA 483/Chd/2022 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and facts on the file in as much he has failed to show as to how the assessment order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of revenue. 2. That the Learned Pr. CIT was not justified to hold that the order was passed by the Learned Assessing Officer without making enquiries and verifications and without properly examining the case thereby ignoring the fact that the matter had already been considered by the Learned Assessing Officer while framing the assessment. 3. That the Learned Pr. CIT failed to appreciate the import of detailed submissions made before him during the course of proceedings u/s. 263 while coming to the conclusion that the order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of Revenue. ITA 484/Chd/2022 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book. It was submitted that, thus, the allegation of the Ld. PCIT that the AO had not carried out any inquiries was factually incorrect because the AO had issued detailed questionnaires and further the assessee also had duly responded to the same. It was further submitted that it is not the case of the Ld. PCIT that the assessee firm had not submitted any documentary evidences before the AO in as much as the assessee had submitted the work orders received from M/s. S.P. Singla Constructions (Pvt.) Ltd. along with the terms and conditions of the private sub contract (placed at pages 38 to 45 of the paper book). The Ld. AR submitted that no details or vouchers for expenses were maintained/provided for the reason that the return had been filed u/s. 44ADof the Act and in that terms of this provision, the assessee was not required to maintain any books of account or bills/vouchers etc. as the income declared under this section is deemed to have been computed after allowing all expenses. It was submitted that in spite of the assessee having furnished the copies of the work contracts, the fact that the AO had chosen to reject the assessee's claim of having carried out sub-contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. It was submitted that it was a clear case where Explanation 2 to section 263 of the Act could be invoked. 5.2. The Ld. CIT DR also placed reliance on the various judgments which have been cited by the Ld. PCIT in the impugned order and prayed that the appeal should be dismissed. 5.3. The Ld. CIT DR also fairly accepted the submission of the Ld. AR that all the five appeals were identical in nature and he also submitted that his arguments would be the same in respect of the remaining four appeals and that the same were not being repeated for the sake of brevity. 6. We have heard the rival submissions and have also perused the material on record. The facts are not in dispute. It is seen that the assessee's case was reopened for the reason that a search had taken place in the S.P. Singla Group of cases, wherein during the course of search, the statement of the auditor of the said group Shri G.K. Garg was recorded, wherein it was stated that the S.P. Singla Group was involved in booking bogus expenses through a network of firms who were shown as sub-contractors. It was stated in the said statement that although these subcontractors did not execute any work, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as under:- 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,-- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other person. [Explanation 3.--For the purposes of this section, Transfer Pricing Officer shall have the same meaning as assigned to it in the Explanation to section 92CA.] (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 6.4. From the perusal of the aforesaid section, it is apparent that the powers of the revision can be exercised suo motu by the Ld. Commissioner. The Ld. Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g assessee's claim of having earned income from sub-contract work and, thereafter, after considering the reply submitted by the assessee, the AO reached a conclusion that the assessee's claim regarding its working as a sub-contractor was not to be accepted and that the assessee's such claim was to be rejected. Thereafter, the AO proceeded to hold that the assessee's work was in the nature of providing accommodation entries and based on this conclusion, the AO held that a rate of 8% should be applied being percentage of commission earned on providing the accommodation entries. Thus, in view of the questionnaires issued by the AO and the replies submitted by the assessee, the conclusion reached by the AO of rejecting the assessee's claim apparently proves that the AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. It is not a case, where no inquiry had been made by the AO. Merely because the Ld. PCIT felt that further inquiry should have been made does not make the order of the AO erroneous and prejudicial to the interest of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted by the Assessing Officer during the course of assessment proceedings and the submissions made by the assessee in response to notice u/s. 263 of the Act, has merely observed that the assessment order was passed without making proper inquiries and it is a matter of record that the Ld. Pr.CIT has himself not undertaken any inquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of the revenue. 6.10. We may further add that there is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Sunbeam Auto Ltd. reported in reported in (2010) 332 ITR 167 (Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s. 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s. 263 on the ground that thorough inquiry should have been made by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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